Charles Freeman , portfolio manager for Windsor Fund, was considering the purchase of CISCO's common stock . Freeman believed that CISCO's camings...
What growth rate is implied by CISCO's current price?
2 .Charles Freeman , portfolio manager for Windsor Fund, was considering thepurchase of CISCO's common stock . Freeman believed that CISCO's camingscan grow at 20 percent per year over the next five years after which the CISCO'Scarings multiple will fall to a market multiple . Freeman thinks that the riskinvolved in CISCO's shares is greater than that for the general market during itshigh - growth phase and , therefore , the appropriate discount rate to be applied toCISCO's shares should be 3 percentage points greater than the long - run returnfrom the market over the next five years .Using the growth - stock valuation model , answer the following two questions "a ) What is the proper value of CISCO ?Hint : It is possible to obtain the dividend yield of the S&P by dividing payout ofthe S&P by its PIE.Mathematically
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